10-QPeriod: Q1 FY2020

ATI INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 5, 2020For Securities:ATI

Summary

ATI Inc. reported financial results for the first quarter ended March 31, 2020, indicating a decrease in sales to $955.5 million from $1,004.8 million in the prior year quarter. This decline was attributed to the divestiture of certain businesses. Despite lower sales, the company saw an improvement in net income attributable to ATI, rising to $21.1 million ($0.16 per diluted share) from $15.0 million ($0.12 per diluted share) in Q1 2019. This improvement was driven by increased gross profit, favorable changes in operational expenses, and a gain from the sale of oil and gas rights, partially offset by higher income tax provisions and restructuring charges. The company is navigating the economic challenges presented by the COVID-19 pandemic through proactive cost reduction measures, including workforce adjustments and reductions in capital expenditures. ATI has also realigned its business segments to High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S) to enhance operational efficiency and unlock synergies. The company ended the quarter with a strong liquidity position, including $639 million in cash and cash equivalents and significant availability under its ABL credit facility.

Financial Highlights

45 data points
Beta

Revenue

$955.50M

14.1% Gross Margin

Net Income

$21.10M

2.2% Net Margin

EPS (Diluted)

$0.16

Total Assets

$5.81B

Cash & Equivalents

$639.00M

Free Cash Flow

-$115.40M

Financial Statements
Beta
Revenue$955.50M
Cost of Revenue$820.70M
Gross Profit$134.80M
SG&A Expenses$58.40M
Operating Income$68.40M
Net Income$21.10M
EPS (Basic)$0.17
EPS (Diluted)$0.16
Shares Outstanding (Basic)126.10M
Shares Outstanding (Diluted)146.40M

Key Highlights

  • 1Sales decreased by 5% to $955.5 million in Q1 2020 compared to $1,004.8 million in Q1 2019, primarily due to business divestitures.
  • 2Net income attributable to ATI increased to $21.1 million ($0.16 per diluted share) in Q1 2020, up from $15.0 million ($0.12 per diluted share) in Q1 2019.
  • 3Gross profit increased by $3.7 million to $134.8 million, with a gross profit margin of 14.1% in Q1 2020, up from 13.1% in Q1 2019.
  • 4The company recorded a $8.0 million restructuring charge in Q1 2020 related to workforce reductions and a voluntary retirement incentive program.
  • 5ATI reported $639.0 million in cash and cash equivalents as of March 31, 2020, an increase of $148.2 million from December 31, 2019.
  • 6The company has implemented various cost-saving measures in response to the COVID-19 pandemic, including temporary idling of operations, salary reductions, and reduced capital expenditures.
  • 7ATI realigned its business segments into High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S) effective January 1, 2020.

Frequently Asked Questions

ATI acknowledged that the COVID-19 pandemic created economic challenges and uncertainty. The company began implementing cost reduction efforts in Q2 2020, including temporary idling of operations, salary reductions, and reduced capital expenditures, to mitigate the financial impact. The report notes that HPMC and AA&S financial results were expected to significantly weaken in the second quarter of 2020 due to demand disruptions.

The High Performance Materials & Components (HPMC) segment saw a 15% decrease in sales, largely due to business divestitures and declines in aerospace & defense markets. However, segment operating profit increased. The Advanced Alloys & Solutions (AA&S) segment experienced a 5% increase in sales, driven by growth in aerospace & defense and energy markets, and saw a significant increase in segment operating profit.

ATI reported a strong liquidity position as of March 31, 2020, with $639.0 million in cash and cash equivalents. The company also had approximately $260 million in available liquidity under its Asset Based Lending (ABL) credit facility. Management believes these resources are adequate to meet its liquidity needs.

ATI recorded an $8.0 million restructuring charge in Q1 2020 related to workforce reductions and a voluntary retirement incentive program. Additionally, the company recognized a $2.5 million cash gain from the sale of certain oil and gas rights, which is reported in other expense, net.